WAKAYA PERFECTION, LLC, a Utah limited liability company; TODD SMITH, an individual; BLAKE GRAHAM, an individual; DAVE PITCOCK, an individual; BARB PITCOCK, an individual; ANDRE VAUGH, an individual; TOTAL NUTRITION, INC, d/b/a TNT a Utah corporation, Plaintiffs - Appellants,
YOUNGEVITY INTERNATIONAL, INC., a California corporation; STEVE WALLACH, an individual; MICHELE WALLACH, an individual; DAVE BRISKIE, an individual, Defendants - Appellees.
from the United States District Court for the District of
Utah (D.C. No. 2:16-CV-00315-DN)
Jonathan O. Hafen (Jonathan R. Schofield, Michael S.
Anderson, and Cynthia D. Love, with him on the briefs), of
Parr Brown Gee & Loveless, Salt Lake City, Utah, for
Jonathan W. Emord (Peter A. Arhangelsky with him on the
briefs), of Emord & Associates, Gilbert, Arizona, for
BACHARACH, EBEL, and MORITZ, Circuit Judges.
BACHARACH, CIRCUIT JUDGE.
appeal involves the interplay between two related lawsuits.
In the first one, Wakaya Perfection, LLC and its principals
sued Youngevity International Corp. and its principals in
Utah state court. The Youngevity parties responded by
bringing their own suit against the Wakaya parties in a
California federal district court and removing the Utah case
to federal court. These steps resulted in concurrent federal
cases sharing at least some claims and issues. For example,
in both cases, the parties disagreed over whether Wakaya
could bring its claims in court rather than in arbitration.
California litigation progressed; and in November 2017, the
federal district court in Utah ordered dismissal, holding
. the court should abstain from exercising
jurisdiction under the Colorado River test and
. an arbitrator would need to decide the
arbitrability of Wakaya's claims.
reverse on both grounds: The court applied the wrong
abstention test and erroneously ruled that an arbitrator
should decide whether Wakaya's claims are arbitrable.
in the Appeal
district court erroneously applied the Colorado
River test in dismissing the Utah lawsuit.
district court erred in using an inapplicable test when
deciding whether to dismiss the Utah lawsuit.
Reversal is necessary when the district court applies the
apply the abuse-of-discretion standard when reviewing a
district court's decision to abstain from exercising
jurisdiction over one of two duplicative federal cases.
Hartsel Springs Ranch of Colo., Inc. v. Bluegreen
Corp., 296 F.3d 982, 985 (10th Cir. 2002). A district
court abuses its discretion when it bases a decision on an
erroneous legal conclusion. Kansas v. United States,
249 F.3d 1213, 1227 (10th Cir. 2001); see also Sprint
Nextel Corp. v. Middle Man, Inc., 822 F.3d 524, 535
(10th Cir. 2016) (stating that a district court's
application of the wrong legal standard constitutes an abuse
of discretion). We must therefore reverse when the district
court applies the wrong test. See Sierra Club v.
Cargill, 11 F.3d 1545, 1548 (10th Cir. 1993) (reversing
because the "[t]he district court abused its
discretion" in applying "the wrong standard of
review and, as a result, the wrong analytical
district court applied the wrong test by treating the
Colorado River test as controlling on abstention
when both cases are in federal court.
district court applied the abstention test set out in
Colorado River Water Conservation District v. United
States, 424 U.S. 800 (1976). In this opinion, the
Supreme Court recognized a narrow doctrine permitting a
federal court to abstain from exercising jurisdiction when a
parallel case exists in state court. Colo. River,
424 U.S. at 813. Given the narrowness of this doctrine, the
Colorado River test requires "exceptional
circumstances" and an "important countervailing
interest" for a federal court to abstain from exercising
jurisdiction based on pending litigation in state court.
Id. (quoting Cty. of Allegheny v. Frank Mashuda
Co., 360 U.S. 185, 189 (1959)); see also Moses H.
Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 16 (1983) (noting that "the balance [is] heavily
weighted in favor of the exercise of [federal]
jurisdiction" in a case involving state-federal
appeal, we must decide whether the Colorado River
test controls when both of the cases are in federal court. We
have recognized that the test applies when one of the cases
is in state court. Rienhardt v.
Kelly, 164 F.3d 1296, 1302 (10th Cir. 1999). In this
circumstance, we have applied the Colorado River
test and recognized eight pertinent factors:
1. the possibility that one of the two courts has exercised
jurisdiction over property
2. the inconvenience from litigating in the federal forum
3. the avoidance of piecemeal litigation
4. the sequence in which the courts obtained jurisdiction
5. the "vexatious or reactive nature" of either
6. the applicability of federal law
7. the potential for the state-court action to provide an
effective remedy for the federal plaintiff
8. the possibility of forum shopping.
Fox v. Maulding, 16 F.3d 1079, 1082 (10th Cir.
however, both of the parallel cases were pending in federal
court. In this situation, courts elsewhere have held that the
Colorado River test does not apply. See Missouri
ex rel. Nixon v. Prudential Health Care Plan, Inc., 259
F.3d 949, 953 (8th Cir. 2001) ("By its own terms,
Colorado River applies only to concurrent state and
federal litigation."); Levy v. Lewis, 635 F.2d
960, 967 (2d Cir. 1980) ("[I]t is clear . . . that
abstention for purposes of judicial economy from exercising
its jurisdiction under Colorado River applies only
where concurrent federal-state jurisdiction exists.");
cf. Life-Link Int'l, Inc. v. Lalla, 902 F.2d
1493, 1494 (10th Cir. 1990) (per curiam) ("[Paris v.
Affleck, 431 F.Supp. 878 (M.D. Fla. 1977)] was a removal
case regarding ...